Treasury secretary sees no new recession

WASHINGTON -- Treasury Secretary Paul O'Neill doesn't see the U.S. economy falling back into a recession, despite stock market turbulence, Americans' eroding confidence and a fitful recovery.

In an interview with The Associated Press on Monday, O'Neill expressed confidence that current difficulties, including the roller-coaster stock market, would be overcome.

"The fundamentals of our economy, I continue to believe, are sound," O'Neill said. "As I travel around and talk to people in communities, I find people are more calm than one would assume."

His upbeat remarks come a day before President Bush convenes a summit in Texas on the struggling economy and the Federal Reserve examines its policy on interest rates, which are now at 40-year lows.

The sputtering economy is posing a political challenge for Bush, with Democrats sharpening their attack on the administration's handling of the economy as the country heads into midterm elections.

O'Neill dismissed charges from prominent Democrats that the administration is only interested in hearing from like-minded Republican business executives who support Bush's policies.

He also dismissed the notion that the timing of the forum had anything to do with Wednesday's deadline for top chief executives to certify with securities regulators that their financial statements are accurate.

"The absurdities that people will suggest about things like this are just mind boggling to me," said O'Neill, who contended that the more than 200 participants in the discussions were selected for their expertise on the economy.

After bolting out of the starting blocks at the beginning of the year, the economy lost considerable momentum in the spring, growing at a rate of just 1.1 percent in the second quarter. That's down from a brisk 5 percent pace in the first three months of the year.

Not in the data

Some private economists are predicting sluggish growth for the second half of this year, while others worry that the recent plunge in stock prices triggered by a wave of corporate accounting scandals might push the economy into a "double dip" recession.

"I don't see the basis for that in the data that we are looking at," O'Neill said. "No, at the moment, I don't see a double dip out there."

O'Neill credited the $1.35 trillion tax-cut package advocated by President Bush and passed by Congress last year, along with the Federal Reserve's 11 interest rate cuts, for pulling the economy out of a recession that began in March of 2001.

But O'Neill said more needs to be done to help the recovery.

He called on Congress to make last year's tax cuts permanent, to pass terrorism insurance and the president's energy program, and to increase protections for workers' pensions, an issue that gained national prominence after thousands of workers at Enron saw their retirement savings disappear with the energy giant's collapse.